Home sale cancellations are on the rise. In January 2026, one in seven home sales in the United States fell through before closing. That’s 40,000 sales, or 14% of planned home sales that month.
Buyers are backing out for a variety of reasons. Many are worried about the economy or their personal finances. First-time buyers are extra cautious since they are spending most of their savings on a down payment.
Home sale cancellations vary in each market, but the California housing market has been significantly more resilient than the rest of the United States. While cancellation rates are climbing nationally, demand in key California regions has remained steady—and in some areas, competition is actually intensifying heading into 2026.
Southern California Leads the Way
Southern California is projected to outperform the rest of the state in 2026, with home sales expected to increase significantly in most major cities in the region. The Inland Empire—encompassing cities like Riverside, San Bernardino, and Ontario—stands out as one of the strongest opportunities for buyers, with an average home value around $578,000 and historically some of the strongest price growth in the state at 7–8% annually over the past decade. It also remains the most accessible entry point in Southern California, making it a prime area to watch.
San Diego and Los Angeles, while slightly higher in price, are also expected to see Zillow-projected price gains of 1.1 to 1.6% by year-end 2026—a sign of continued stability even as other U.S. markets soften.
The Central Coast and Central Valley
The Central Coast has been a surprising bright spot, posting double-digit year-over-year sales gains—the biggest jump of any region in California. For buyers seeking a balance of lifestyle and value, this corridor from Santa Barbara to Monterey is worth serious consideration.
The Central Valley—including Sacramento, Fresno, and Bakersfield—offers some of the most accessible price points in the state. The Central Valley starts around $480,000 for a median home, and these markets continue to attract buyers priced out of coastal cities. Steady, reliable demand makes this region a strong long-term bet.
The Bay Area: Tight Inventory, Strong Fundamentals
The Bay Area continues to be defined by limited supply and high demand. High-demand cities like Menlo Park, Palo Alto, Burlingame, and Los Altos are expected to benefit meaningfully from even small drops in mortgage rates. Inventory remains tight, which continues to support home values even as the broader market cools.
What This Means for You
These cancellations are part of a larger national trend. Even though prices and mortgage rates have lowered slightly, many buyers remain cautious. Economic worries and uncertainty continue to make people step back or delay buying homes as 2026 begins.
But in California, with mortgage rates retreating to near four-year lows and price growth easing, the stage is set for a more balanced market by offering buyers increased opportunities. For would-be buyers who sat out the competitive market during the past couple of years, this means more room to negotiate, more choices, and more time to make confident decisions.
If you’re thinking about buying, selling, or refinancing and want to understand your options, give us a call at (760) 930-0569. We’re here to help you navigate the housing market with confidence.
